<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The preference to receive benefits as early as possible and delay costs as much as possible is natural for people. That means a positive discount rate in the intertemporal choice, which is a common assumption in economics. However, as research in behavioral economics proves, in certain situations a negative discount rate occurs. The purpose of this paper is to show that the assumption of positive discounting is not always true. The presented experimental study shows how a decrease in probability increases the chances of negative discounting. According to the results, the expected large, uncertain profit is more likely to be deferred over time than a certain profit of the same value. On the other hand, the expected large, uncertain loss is more willingly experienced earlier than a certain loss of the same value. In both cases, it means an increase in the frequency of negative discounting due to increased uncertainty. The results of the study broaden the existing knowledge about the impact of probability on discounting in a situation of expected losses and the area of negative discounting.</p>
</abstract>

The preference to receive benefits as early as possible and delay costs as much as possible is natural for people. That means a positive discount rate in the intertemporal choice, which is a common assumption in economics. However, as research in behavioral economics proves, in certain situations a negative discount rate occurs. The purpose of this paper is to show that the assumption of positive discounting is not always true. The presented experimental study shows how a decrease in probability increases the chances of negative discounting. According to the results, the expected large, uncertain profit is more likely to be deferred over time than a certain profit of the same value. On the other hand, the expected large, uncertain loss is more willingly experienced earlier than a certain loss of the same value. In both cases, it means an increase in the frequency of negative discounting due to increased uncertainty. The results of the study broaden the existing knowledge about the impact of probability on discounting in a situation of expected losses and the area of negative discounting.

The effect of uncertainty on negative discounting

International Journal of Management and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"The effect of uncertainty on negative discounting"}

The preference to receive benefits as early as possible and delay costs as much as possible is natural for people. That means a positive discount rate in the...

	Immediately (%)	3 months (%)	12 months (%)
Loss US$10,000, probability 100%	13.1	14.8	72.1
Loss US$10,000, probability 95%	16.4	23.0	60.7
Loss US$10,000, probability 50%	18.0	32.8	49.2
Loss US$10,000, probability 5%	29.5	16.4	54.1

	Immediately (%)	3 months (%)	12 months (%)
Loss US$200, probability 100%	47.5	16.4	36.1
Loss US$200, probability 95%	45.9	24.6	29.5
Loss US$200, probability 50%	32.8	39.3	27.9
Loss US$200, probability 5%	50.8	13.1	36.1

	Immediately (%)	3 months (%)	12 months (%)
Profit US$10,000, probability 100%	88.3	8.3	3.3
Profit US$10,000, probability 95%	85.0	13.3	1.7
Profit US$10,000, probability 50%	71.7	26.7	1.7
Profit US$10,000, probability 5%	71.7	18.3	10.0

	Immediately (%)	3 months (%)	12 months (%)
Profit US$200, probability 100%	83.3	10.0	6.7
Profit US$200, probability 95%	81.7	15.0	3.3
Profit US$200, probability 50%	73.3	23.3	3.3
Profit US$200, probability 5%	75.0	18.3	6.7

The effect of uncertainty on negative discounting

Article Category: Empirical Paper

Pubblicato online: 31 dic 2021

Pagine: 287 - 298

Ricevuto: 14 feb 2021

Accettato: 27 ago 2021

DOI: https://doi.org/10.2478/ijme-2021-0023

Parole chiave
behavioural economics, intertemporal choice, negative discounting, uncertainty

© 2021 Marcin Palenik, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The response percentage for the US$10,000 loss condition and its various probabilities

The response percentage for the US$200 loss condition and its various probabilities

The response percentage for the US$10,000 profit condition and its various probabilities

The response percentage for the US$200 profit condition and its various probabilities

The effect of uncertainty on negative discounting

Article Category: Empirical Paper

Pubblicato online: 31 dic 2021

Pagine: 287 - 298

Ricevuto: 14 feb 2021

Accettato: 27 ago 2021

DOI: https://doi.org/10.2478/ijme-2021-0023

Parole chiavebehavioural economics, intertemporal choice, negative discounting, uncertainty

© 2021 Marcin Palenik, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The response percentage for the US$10,000 loss condition and its various probabilities

The response percentage for the US$200 loss condition and its various probabilities

The response percentage for the US$10,000 profit condition and its various probabilities

The response percentage for the US$200 profit condition and its various probabilities

Parole chiave
behavioural economics, intertemporal choice, negative discounting, uncertainty